An Array of Reasons to Invest in Solar in 2023
ROI under 5 years, Plus Decades of Revenue Production
If you haven’t looked at solar panels for your building recently, it’s time to take another look. In 2023, the combination of sustainably generating your own clean energy, locking in rates, getting utility incentives, tax credits, accelerated depreciation, and other incentives can all make for an attractive package that “pencils out” well, often under 5 years ROI with 25 more years of pure money generation while the sun shines. We have several projects demonstrating ROI in 3-5 years, with a typical Internal Rate of Return (IRR) of 15-20% at year 10, and 20-23% at year 30.
30-60%% Tax Credit
The Inflation Reduction Act (IRA), which we covered in a previous post, Building Owner Benefits of the Inflation Reduction Act, raised the Investment Tax Credit (ITC) back up to 30% or more as of 1/1/2023 through 2033 for qualifying solar and battery implementations. And, it provides an additional 10% for using qualifying U.S. components, an additional 10% for low-income service, and 10% for locations meeting energy-related qualifications - up to a potential 60% of project costs.
+10% for Domestic Content, with thresholds for U.S.-produced steel and components. Minify Energy is sourcing domestically and leveraging this 10% adder to achieve 40% ITC on solar projects for our clients.
+10% for those Located in an “Energy Community” which includes brownfield sites or those communities meeting certain factors related to coal/ oil/ natural gas.
+10% for Low-Income Benefits, for solar power projects serving low-income recipients.
The above must also meet the requirements for the Act Beginning Construction Deadline and the prevailing wage and apprenticeship requirements.
Nonprofits Get Direct Payment of ITC
Prior to 2023, Nonprofits and other tax-exempt organizations seeking to leverage incentives for solar would have orchestrated 3rd-party investor financing. Now, nonprofits can receive a streamlined direct payment for the full ITC amount! This Solar Power World article shares more on who qualifies.
Bonus Depreciation
Under the Modified Accelerated Cost Recovery System (MACRS) depreciation for solar projects can take Federal depreciation year 1, and State depreciation spread across the first 5 years. This further bolsters the financial case for solar while adding value to your property as an asset. This is based on the installed cost of the system, less half the ITC value, as a basis, factoring your tax rate. This U.S. Department of Energy (DOE) article shares explanations and tables reflecting ITC and bonus depreciation (and, we’ll help to determine this for your organization and property if interested in a solar proposal).
Energy Production
The energy you produce offsets your building’s total demand, lowering your utility-sourced electricity and corresponding demand charges. This is particularly timely, given the increases in energy costs. And, with net metering, you can sell back to the utility what you produce. Your solar array can be a revenue producer for decades.
Utility Incentives
Electric utilities provide incentives to pay you for your solar production. In Minnesota, Xcel Energy PV Demand Credit offers a $.07/kWh for production from 1PM-7PM during peak demand, for a 10-year period; this can add up to thousands of dollars per year.
Local Incentives
Several local programs based on facility locations in cities and zones (such as Minneapolis Green Cost Share, Green Zones, and Great Streets) provide grants or incentives for production.
PACE Financing Can Bundle Solar and other Projects
Property Assessed Clean Energy (PACE) - MinnPACE in Minnesota - financing provides a special tool for solar and other renewable and energy-efficiency projects, such as energy audits, roofing and envelope updates, high-efficiency HVAC upgrades, Energy Management/ Building Automation Systems, LED lighting, and EV Charging. This financing has a special assessment with debt tied to the property (which can be passed on to owners and tenants), protecting your working capital and enhancing building value. It is offered to cover up to 20% of the assessed property value, with low-interest rate loans with twice-yearly payments starting in May of the year following installation. This is widely available to nonprofits and commercial properties, including offices, industrial, and multifamily (with over 4 units) properties.
Sustainability Value
Your solar generation helps in the move toward electrification and reduction of greenhouse gasses (GHGs), reducing your building’s carbon footprint, supporting sustainability programs, and fueling ESG.
Solar Assessment for Sizing and Feasibility
With a little bit of input, you can get a quick system sizing and cost, with cashflow analysis to demonstrate the above factors and bottom line savings and investment value, helping make the case for a solar panel array on your property. Minify Energy is helping clients (and their CFOs) leverage these programs for whole-building, deep-green energy retrofits that significantly reduce costs, consumption, and carbon. Contact us to explore solar at your property.